San Francisco Or Palo Alto?

When I started TechCrunch in 2005 there was no question that Palo Alto was the center of the tech universe. San Francisco was really pretty and a nice place to see the symphony, but all the startup action was in and around Stanford University in Palo Alto.

TechCrunch eventually moved away from Palo Alto and set up shop in the southern part of San Francisco. That decision was partially due to the fact that many of the writers wanted to live in the city, but also because San Francisco leases were far cheaper than Palo Alto. Still, it felt odd to be in SF.

Just about everything important in tech seemed to happen around Palo Alto. I remember making fun of Loic and Geraldine, who run the immensely popular LeWeb conference, when they moved to San Francisco. “Just don’t expect me to come visit very often,” I remember telling him.

Even a few years ago larger companies like Google had lots of employees in San Francisco, but it always felt like a satellite office (because it was). There were SF based companies like Salesforce, too, but they were the exception.

Real tech stuff happened in and around Palo Alto. Where Google, Yahoo and everyone else was headquartered. When employees left to start their own companies they generally started them there. And so other startups made sure they were there, too.

Sand Hill Road in Menlo Park, where all the venture money was (and mostly still is) had its own gravitational pull, too.

The venture capital is still down there. As is Google and Yahoo, and now Facebook. Y Combinator is in Mountain View, even further south. In many ways nothing has changed.

Something has changed, though. Not only are maturing startups like Twitter and Zynga based completely in San Francisco, but it feels like most of the new startups are basing themselves there, too.

Part of it might be these free shuttles all the big companies run down to Palo Alto every day. Thousands of employees working in and around Palo Alto can now easily live in San Francisco and take advantage of free transportation with WiFi. Now when they leave and start companies, they do it closer to home. Back in the old days living in San Francisco meant a grueling commute back and forth every day. These shuttles have probably led to many people moving to SF that otherwise wouldn’t.

There’s nothing scientific about these observations. But I take a lot of meetings as an investor (as I did as a writer). And over the last several months the vast majority of these meetings are in San Francisco, not Palo Alto.

We’re fairly indifferent on where we meet people. I live in Seattle, MG Siegler is in San Francisco and Pat Gallager is in Palo Alto. AOL lets us use their offices in Palo Alto and San Francisco, and the team tends to form up in different places on different days.

Most people, though, just want to meet in San Francisco.

Specifically, most meetings are in SOMA. And a huge percentage of those meetings, especially the informal ones, are at the Creamery in San Francisco.

If I walk into the Creamery and don’t see someone I know it’s notable. If it’s a slow afternoon in San Francisco, talking a walk to the Creamery will almost always result in something interesting happening. I think CrunchFund has probably closed (meaning the verbal agreement part) more deals there than anywhere else.

Part of why I like the bay area is because so many people there are in tech that it’s the center of all conversation. Even a few years ago San Francisco didn’t feel like part of the party. Somehow it stole the show.

For years Herzliya was Israel’s Palo Alto – with tech-centric startups and all the VCs clumped in one strip. Over the last few years the exact same urbanization trend moved most of the new design/UX-centric startups to Tel Aviv; a vibrant young metropolis beach town with an amazing creative vibe, nightlife, hipsters, year-round sun and over 600 startups (within 400K total population!). The Startup Nations San Francisco.

1 SOMA is lot more concentrated than PA/Mt. View.
2 Public transport a lot better in SF(BART, Caltrain, and MUNI) and it is central to the whole bay
3 Because of #2, (relatively) easier access to talent in SF
4 SF mayor promoting startups/friends with valley influencers(?)

funny, I just mentioned in an interview with Semil that of the big tech talent shifts I’ve noticed in just the past five years is the move 30 miles north to SoMA. I think it’s not only because of employee shuttles (people chose SoMA/Mission in part to be closer to the southernmost SF stops — it’s a long ride) but also that Facebook discontinued its rent subsidy for employees living within a mile radius of the old University Ave HQ. By that point rent in Palo Alto had become as high as in San Francisco, so it made more sense to move up.

SF is vibrant, dense and engaging. If I were a 21 year old software developer I’d much rather be sipping lattes and jetting between meetings on my fixie than choosing between the Olive Garden or Applebee’s everyday in Santa Clara.

There’s an entire culture down south that is really starting to show its age as well. A lot of the talent down there stays in the area that they have homes and families. Understandable but you start to see a narrowing of the innovation gene pool as a result.

Seems like even back in 1995 San Francisco was the Multimedia hub. As others have stated San Francisco is much more convenient and enjoyable than Palo Alto. In comparing the 2 cities there is really nothing redeeming or interesting about Palo Alto. My company peaceofcode.com has had an office since 2008 when we were just medialabpro.com. Im originally from Santa Cruz, CA. and now LOVE San Francisco!! Sadly I spend most of my time in Japan, China, India working with our coding teams.

Sorta joking :-) I always wondered why SOMA and Market or SOMA and Nob Hill or SOMA and Russian Hill are not all called SOMA? One street over and you are in a different neighborhood :-) Maybe that is what makes San Francisco so diverse.

I wouldn’t dismiss Eluos’ complaints so blithely. I’m just one data point here, but in just my last few years living in SF, my (92 Sentra!) car was broken into three times (including once when parked across from a church!), I was violently mugged, and I got tired of it taking me 45 minutes to get from one part of the city to another (twice that on the unreliable and dirty MUNI).

Also, justifying SF rents by comparing them against NYC rents is like saying, “Well, you may be a quadruple amputee, but at least you’re not dead yet.” I share a beautiful Mountain View townhome (that includes a 2 car garage, proximity to a large park + pool + hot tub, and more, in a super-safe area that’s a 5 minute bike ride from downtown) and — if I could even find such a place in SF — I’d be paying probably double the rent.

Yeah, I miss being close to the Symphony and good musical theatre and some of my favorite other old SF haunts. But on the whole, it’s just a hugely better quality of life here away from SF… at least for me (admittedly a 40-year-old geek).

Berkeley! Most of the Cleantech startups – and many VCs who focus on Cleantech – are around Berkeley, particularly along the I-80 corridor. There’s also a lot of cross-pollination with Cal as well as the Lawrence Berkeley Lab.

We office less than a block from the Creamery (38 Bluxome). I thought for sure we should be located in Palo Alto (I live in Dallas), but my SF-based guys insisted we choose SOMA instead. Turns out they were right. EVERYONE is there. All the action is just blocks away in any direction. Two blocks from CalTran and if we need to jet down the peninsula we can easily do so anytime. My broker sent this map of funded startups in the area:

I seem to recall the city of San Francisco giving Twitter various tax breaks in order to incentivize the company to remain in the city. Has SF scrapped these taxes for all? Or, does each firm have to negotiate a deal with the city? Will they?

Awesome weather, cheap real estate, and no need to pay state tax. Great to do business with Europe and Latin America. The best engineering minds from Latin America come running away from left wing Dictators and are willing to work hard for a lot less than what you have to pay for on the west coast.

It doesn’t matter where you are nowadays, code doesn’t care where it’s written, and suits can use skype, phones or travel (they like to do that a lot to spend the company’s budget to bring in the juicy deals)

Did I mention that for single guys it’s also the best party spot and place to meet hot singles too? Miami FTW.

gubatron you point out the simple fact that it really doesn’t matter where you are nowadays…I’d argue you don’t really need an office if your team has an ounce of maturity and is really in it to reach the company goals. Building companies in places like NV or FL where there is no state income tax or reduced or non-existent cap gains taxes can also end up being a tremendous benefit if you build to an eventual exit.

i agree about miami, i lived there for two years and frankly it is heaven on earth. but it does have some problems (and hence why i had to leave). specifically, the talent opportunity is great — IF you’re plugged into the latin american community. if you’re not……good luck. as a person who is indian by race and american in the sense that i was born and raised here and not a very good spanish speaker, i find networking much, much easier in san francisco. related to this is that miami is a poorly designed city, very spread out with lots of poverty all over the place. san francisco is more tightly designed and thus much easier to meet people. in san farncisco you can go to some random tech event and walk out with contacts. in miami that is much, much more difficult to accomplish.

the tax issue is a big deal. all these internet entrepreneurs setting up shop in san francisco need to learn about money and taxes. time to go offshore. or at least to florida.

The South Bay / Peninsula / San Francisco tango is a long tradition in the tech industry. Silicon Valley famously started in Palo Alto, with the famed HP garage (which I’ve walked past many times).

During the chip-dominated era (there’s a reason we call it Silicon Valley), the South Bay reigned supreme. Intel, Cisco, and their brethren all hang out in the South Bay.

Once software became a bigger deal, Palo Alto and its proximity to Stanford (along with virtual suburbs Mountain View and Menlo Park) took over as the place for startups to get their start. Think everyone from Google to Facebook.

Yet during the dot com boom, San Francisco had its share of adherents, especially among media companies, which thrive on young creatives that don’t need to worry about raising kids.

It certainly seems like San Francisco is the center of things these days–every company founded by twentysomethings seem to want to move to the city, but that’s a reflection of the number of consumer/youth-oriented companies being started. And the current flavor of the month, Pinterest, is firmly ensconced in, where else, Palo Alto.

In the end, there are people who like and hate San Francisco, just as there are people who like and hate Palo Alto. And then there are the people who need the cheap land in the South Bay.

I agree with Chris and his timeline. Born and raised in Palo Alto, growing up here PA was never part of “Silicon Valley”. Silicon Valley was the south bay, San Jose, Santa Clara, Sunnyvale. It seemed weird to me that around 1999 – 2000 Palo Alto and Menlo Park were referred to as Silicon Valley.

In the late 90’s I was working SOMA, when it was a small, but popular area. I remember going to the ground-breaking ceremony for the new “Pac Bell” park. Slowly but surely the entire neighborhood has improved and there is plenty to do in SOMA, which is ideal for new businesses. I think there will be an ebb and flow around the popular areas based on the type of companies that are residing in those areas and the demographics that make up the companies. SF will seem the perfect place for some and the same goes for Palo Alto. It’s all good. Isn’t it great to see money and businesses thriving in California?

… 2005 seems like such a long time ago. Also, I sense that Mike has a little more time now to slow down and reminisce… Palo Alto and SF are now different places — a little nostalgia now and then is good for the soul…
But, to be fair, with a little more money to invest/pend, “everywhere” is different, plus the feeling that we could be part of a successful future of a start up.

Besides the easy transport to the Peninsula from SOMA would the main reason people are starting up there based on cheap rent? I was under the impression that recently more start ups were moving to the Mission area. I work right next to Cal Train and love how easy it is to get to and from work (I’m the opposite, live in PA work in SF)

I think SF (just like NY) is becoming a hub also because many more people than before want to do startups now since the rest of the economy is not as stellar as Silicon Valley. More people live in SF than Paly or around and so they start where they are. However, nothing will beat that fact that in Palo Alto there is fairly little to do than work hard and go to Nolas when you are exhausted. SF is too vibrant of a place for an endeavor that looks for people to give up their time, mind and soul. IMHO, its a great place for a startup thats past the initial 1-2 years of the nose on the grindstone time better suited to Palo Alto.

Both are great places, I had a conversation recently with an engineer/entrepreneur friend of mine who claims that the migration to SF is a result of startup office culture, namely after work parties, nobody wants to hang in a room full of engineers talking about code after a long day of coding, they may love it, but its the diversity that is born out of mingling with “creatives” (such as social media professionals) that is fostering the innovation in the bay area now, creatives are realizing there is an art to coding and engineers realize there is a science to what may seem like a bunch of pointless jockeying and gladhanding. Plus Palo Alto is not exactly the epicenter of great nightlife like SF is. For my money, it’s SF, hands down.

Feels to me there have been several ratchets in the direction of SF over the last ~20 years. I moved there in 1994, and it was clearly a backwater. I think this is when South Park was called “multimedia gulch” but I think the emphasis was on using tools, not making them. The .com period was one ratchet, mid-200xs another, last few years another. In each period there’s a notable increase in technically interesting and impactful entities in SF. Hopefully in the next boom SF belatedly fulfills its destiny to be the Manhattan of the west such that there’s enough space for it to become the unambiguous center of the tech universe, and they go back to growing fruit in the valley, or something else it makes sense to tolerate absurd heat for.

First of all, Mike, THANK YOU for not calling it San Fran! For folks moving to the SF Bay Area, locals do not call the city, Frisco nor do they call it San Fran. I think a couple of folks raise some great points (Reuben Moore & Chris Yeh) in particular. I had an office on Townsend near the train station and that area has always been a thriving spot for tech startups. When the city invested millions in all of the local commerce around SOMA that made a huge difference particularly when the tech sector was struggling to get out of its funk. As a business owner, i don’t like the additional financial burden that SF places on startups so hopefully the city board will wisen up and eliminate the ridiculous taxes and requirements that they have allowed Twitter to circumvent and have drove some businesses, yours truly included, out. Net/net, the Palo Alto/Mtn. View/Menlo area is a small but potent and dynamic arm of the tech sector but the City is much bigger and its diversity and attractions will IMO outweigh what the Peninsula can offer.

I recently moved to SF from London where I spent 12 years. My wife (who lived here previously when she setup the VC strategy for MSFT back in the day) and I chose SOMA to live and work for two reasons:

1. We like to live within walking distance of the city center, as we did in London
2. From an outsider’s perspective, Palo Alto is boring. Beautiful place indeed, but nothing socially is happening there. No offense to anyone living there :)

Further to what Yaron Samid commented, these days when so many consumer and media startup set off the ground, the food-chain of large company working with a media markering company-working with FB and SmarPhone apps vendors.
All of a sudden, from an IT-centric high tech era, we are becoming a commodity-social media centered high tech times. Thus so many startups cling to the large guys on the block in the big city.

I really liked this post. I go here all the time that I had to give your blog & the Creamery a major shout out on my fashion site. It’s one of my favorite spots in SOMA but I now idea business was done here too. I’ll have to bring my laptop next time.

Interesting post. We are in Palo Alto and love the flair and the weather – yet we are seriously considering moving to SF. No, not because I’m a sailor but because most of our business friends are there. Almost all Social Media Startups are in the City. So we are looking to find a spot near Pier 1 1/2 ;)
Axelhttp://XeeMe.com/AxelS
(my social presence)